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GOP Delivers Sweeping Plan for Vote Next Week: Tax Debate Update

(Bloomberg) -- Congressional Republicans revealed the final details of their agreed-upon tax-overhaul legislation Friday. It’s the culmination of a six-week legislative sprint designed to deliver a major policy victory for their party and President Donald Trump before year’s end.

For a summary of the bill’s contents, click here.

Here are the latest developments, updated throughout the day:

GOP Delivers Sweeping Plan for Vote Next Week (6:38 p.m.)

Republican leaders finalized their plan for a sweeping set of tax cuts for businesses and individuals Friday evening as two key GOP senators backed the plan -- all but guaranteeing a major policy victory for President Donald Trump.

The bill would cut the corporate tax rate to 21 percent in 2018 -- and temporarily cut rates for individuals as well. Other temporary changes, which would last through 2025, would boost the standard deduction and child tax credits and modify state and local tax deductions and the mortgage interest deduction.

As a bonus for Republicans, the measure would repeal the individual mandate that requires individuals to purchase insurance -- a measure imposed by the Obamacare law. Repealing that Democratic legislation has been among the party’s long-sought goals.

Congressional budget experts have estimated that repealing the mandate would result in 13 million fewer people having health insurance in 10 years.

Trump’s White House welcomed news of the final tax plan.

“By lowering tax rates, simplifying the rigged and burdensome tax code, and repealing the failed tax on lower- and middle-income households known as the Obamacare individual mandate, this legislation will grow our economy, raise wages, and promote economic competitiveness,” said Sarah Huckabee Sanders, Trump’s press secretary.

“This April 15 filing season -- that is the last time you will file under this monstrous, broken tax code,” said House Ways and Means Chairman Kevin Brady, who will shepherd the final legislation through the House. The House plans to hold that vote Tuesday, House Majority Leader Kevin McCarthy of California said in a statement.

“The House and Senate have agreed to a unified tax plan, and we will deliver it to the president’s desk just in time for Christmas,” McCarthy said. The Senate also plans to vote by mid-week.

Senate leaders gained two important votes Friday: GOP senators Marco Rubio of Florida and Bob Corker of Tennessee confirmed they’d vote “yes.” Rubio had sought an enhanced child tax credit -- a change that was made in the final version. Corker, who cited concerns about the bill’s effect on the federal deficit, said he’d had a change of heart.

A preliminary score from Congress’s Joint Committee on Taxation showed that the new version of the bill would increase federal deficits by $1.46 trillion over 10 years -- before accounting for any economic growth that might result. Earlier versions of the legislation were estimated to boost deficits by roughly $1 trillion even after such effects.

The agreed-upon plan emerged after a six-week procedural sprint that began when an initial House bill was introduced Nov. 2. As that process unfolded rapidly, Democrats complained that they were shut out of it. They decried it as a tax cut that will mostly benefit high earners and predicted the rapid process would lead to drafting errors or unintended consequences.

Brady said Friday evening that he expects the bill will require technical fixes, but said that’s not unusual.

A link to the conference report is here. And a summary of the agreement can be found here.

Bill’s Highlights Spelled Out in Document (5:01 p.m.)

Republican tax writers plan to repeal the corporate alternative minimum tax and almost double the standard deduction for individuals, according to an official document that lists the highlights of the plan.

The document was obtained by Bloomberg News. -- Sahil Kapur

Corker to Vote Yes, All But Ensuring Passage (3:42 p.m.)

Republican leaders secured a major victory Friday in their rush to pass sweeping tax cut legislation as GOP Senator Bob Corker said he will support the $1.4 trillion cut.

Lawmakers in the Senate and House plan floor votes next week on a final version of the bill, which would cut tax rates on businesses and individuals. The bill would represent the GOP’s only major policy victory this year -- but a major one for President Donald Trump.

Corker’s unexpected announcement on Friday -- before the final bill was released -- was a major shift from the “no” vote he cast when the Senate considered the legislation on Dec. 2. He cited concerns about the bill’s effect on the federal deficit, and was the only GOP senator to side with Democrats in a 51-49 vote.

Earlier versions of the legislation have been estimated to increase federal deficits by roughly $1 trillion over the coming decade -- even after accounting for economic growth that might result.

Corker said in a statement Friday that he believed the bill, along with regulatory changes and pro-growth trade and immigration policies, could ultimately have a positive impact on Americans.

“I have decided to support the tax reform package we will vote on next week,” Corker said in a statement Friday. “This bill is far from perfect, and left to my own accord, we would have reached bipartisan consensus on legislation that avoided any chance of adding to the deficit and far less would have been done on the individual side with items that do not generate economic growth.”

The White House greeted the news with appreciation. “The President greatly appreciates Senator Corker’s phone call and pledge to support tax cuts,” White House Press Secretary Sarah Huckabee Sanders said in an emailed statement. “He sees a great entrepreneurial spirit being released in our country and he is a part of that spirit. When these massive tax cuts and incentives kick in, jobs and growth will follow at a very high level.-- Sahil Kapur

Income Limits for Pass-Through Break Lowered (3:24 p.m.)

The revised GOP tax plan will slash the income limits at which so-called pass-through businesses can take full advantage of a new deduction.

The bill would only allow pass-through owners who are married and make less than $315,000 (or half that for single taxpayers) to take a 20 percent deduction, according to a document outlining the changes that was obtained by Bloomberg News. The Senate tax bill approved Dec. 2 would have allowed a 23 percent deduction for business income, and phased that deduction out for single taxpayers making more than $250,000 or married couples making more than $500,000.

The tax treatment of pass-throughs, such as partnerships, limited liability companies and sole proprietorships, has been one of the main points of contention between the House and Senate. The House tax bill approved last month called for a top rate of 25 percent on pass-throughs’ business income, but placed limits on who could qualify for the rate. Most service professionals were exempted.

The GOP bill will permit all businesses under the income thresholds, regardless of whether they’re service professionals or not, to take advantage of the 20 percent deduction. -- Lynnley Browning and Alexis Leondis

Rubio Says ‘Yes,’ Improving Bill’s Prospects (2:44 p.m.)

Republican Senator Marco Rubio will support a compromise tax-overhaul package, an aide said -- giving GOP leaders an increased measure of comfort that they’ll score a major legislative victory next week.

Rubio, of Florida, got to “yes” after Senate and House leaders agreed to expand the “refundable” portion of an expanded child tax credit -- effectively giving working-class families a larger share of the benefit. --Anna Edgerton

Compromise Tax Bill Report Due This Evening (2:07 p.m.)

Republican leaders plan to release a report at 5:30 p.m. on the final tax legislation that they’re preparing for votes next week, House Ways and Means Chairman Kevin Brady said.

That report will lay out leaders’ plans for reconciling differences between the tax bills that passed the House last month and the Senate on Dec. 2. It’s not yet clear how closely the report will resemble actual legislative text. Lawmakers’ plans call for publishing the full text later.

Some details of the legislation have already emerged; it would set a 21 percent corporate tax rate rate beginning in 2018 -- down from 35 percent. And it would set a top individual income-tax rate of 37 percent, down from 39.6 percent. --Laura Davison

GOP Bill to Meet Rubio’s Child Credit Demand (10:56 a.m.)

Republican leaders will increase the refundable portion of the child tax credit to $1,400, according to Representative Kristi Noem -- a move that would meet Senator Marco Rubio’s demand that the credit’s refundability increase beyond $1,100.

“We’re in a good spot,” said Noem, one of the House-Senate conference committee participants.

Rubio had emerged as a potential hurdle for the GOP tax bill in recent days, saying he intended to vote against it as written unless the refundable portion of the child tax credit were increased.

Rubio and Senator Mike Lee, a Utah Republican, have proposed expanding the credit to make more of it refundable against payroll taxes, a change that would help more working class families.

“We have not seen bill text, and until we see if the percentage of the refundable credit is significantly higher, then our position remains the same,” Rubio spokeswoman Olivia Perez-Cubas said in an email Friday morning.

Republicans have a narrow majority in the Senate, where they passed an initial version of tax legislation with just 51 votes. Losing Rubio’s support would still allow them to pass the final legislation, but would mean that Senate leaders could lose no others, assuming Senator Bob Corker votes “no” again. -- Kaustuv Basu and Sahil Kapur

GOP Bill Will Preserve Estate Tax, Noem Says (10:41 a.m.)

The Republican tax bill will preserve the estate tax, while temporarily doubling the threshold limits at which the levy kicks in, according to Representative Kristi Noem, one of the House-Senate conference committee tax negotiators.

The change would reduce the number of multimillion-dollar estates that are hit with the 40 percent tax -- before returning to current limits in 2026. Both chambers called for doubling the exemption limits for the tax, but the House bill had called for its full repeal in 2025.

President Donald Trump along with Republicans have promised they would get rid of the levy, which conservatives often refer to as the “death tax.”

The estate tax currently applies a 40 percent tax rate to estates worth more than $5.49 million for single individuals, or $10.98 million for couples.

Noem of South Dakota said she’s disappointed it isn’t being repealed, but happy to see policy is being improved. -- Kaustuv Basu

GOP Drops Some Controversial House Measures (10:20 a.m.)

House and Senate tax negotiators have decided to drop some of the most controversial provisions -- measures related to religion, health care and education -- that were included in the House bill approved last month.

A repeal of the Johnson amendment -- which prohibits tax-exempt nonprofits like churches from supporting or opposing political candidates -- isn’t part of the final tax bill. The House legislation had called for stripping the amendment, a move welcomed by evangelicals, while the Senate bill approved Dec. 2 was silent on the issue.

The conference committee’s move was welcomed by the top Democrat on the Senate Finance Committee, Ron Wyden of Oregon.

“I’m pleased to announce that Democrats successfully prevented the repeal of the Johnson Amendment from being jammed into any final Republican tax deal,” Wyden said in a statement. “I will continue to fight all attempts to eliminate this critical provision that keeps the sanctity of our religious institutions intact, prevents the flow of dark money in politics, and keeps taxpayer dollars from advancing special interest biddings.”

Another House provision -- the repeal of medical expense deductions -- has also been dropped from the compromise bill, which is scheduled to be released later Friday. Instead, the final bill will follow the Senate legislation and include a two-year tax extended tax break for individuals with high medical expenses, according to two people familiar with the provision who described it on the condition of anonymity.

The provision lowers the amount people have to spend on health costs before they can deduct those costs, to 7.5 percent of their income, from 10 percent under current law. Its expansion was pushed for by Senator Susan Collins, the Maine Republican whose vote is crucial to passing the tax package.

The conference report will also call for removing a provision from the House-passed bill to tax higher education tuition waivers, according to two senior congressional aides. The move had sparked outcry from graduate students and their advocates for fear that it would hammer many of them financially. -- Sahil Kapur and Kaustuv Basu

Mystery, Suspense Mount as Final Plan Is Due (4:00 a.m.)

Congressional tax negotiators are hours away from signing a compromise, but two important questions remain: Where’s the money? And do they have the votes?

Changes that have been revealed so far -- many of them sweeteners designed to secure those needed votes -- would probably push the overall tax cut in the plan over a $1.5 trillion limit that Congress set earlier this year. But so far, any measures that would help offset the cuts and bring the bill back in line have been closely guarded.

Potential ways to boost revenue -- such as reducing the duration of the planned individual tax cuts so that they’d expire by 2024 -- have been mostly swatted down.

GOP Delivers Sweeping Plan for Vote Next Week: Tax Debate Update

“Never heard that -- don’t know where that’s coming from,” Senator John Thune, the chamber’s No. 3 Republican, said in response to questions about imposing earlier “sunsets” on the individual rate cuts. They’d expire in 2026 under the Senate bill that was approved Dec. 2.

Thune said Thursday that various provisions would offset higher costs of the most recent tweaks to the final bill, but he didn’t specify them.

Sweeteners that have emerged this week -- including cutting the top individual tax rate for the highest earners to 37 percent, from 39.6 percent currently, and broadening the kinds of state and local taxes that would qualify for an individual deduction that’s capped at $10,000 -- are expected to lose an estimated $200 billion or more over 10 years.

GOP leaders may be keeping the so-called spinach under wraps partly because they have only a slim majority in the Senate and want to prevent members of their own party from making additional last-minute demands. Senator Marco Rubio of Florida on Thursday threatened to vote against the bill unless negotiators boost the child tax credit.

Rubio’s opposition -- along with that of GOP Senator Bob Corker of Tennessee, who voted against the Senate’s version of the legislation -- would put the bill within one vote of collapse.

Lawmakers appeared to be tweaking the final agreement Thursday to make the numbers work. When Senate Finance Chairman Orrin Hatch was asked about what the so-called pay-fors would be, he responded: “I’m not quite sure what they all are.”

Hatch added that he didn’t know if lawmakers would be able to meet Rubio’s demand. Asked if the Senate could pass the bill without Rubio’s vote, he said, "Probably."

In their compromise legislation, lawmakers have considered setting the corporate rate -- which is currently 35 percent -- at 21 percent instead of 20. That change would allow them to begin the rate cut in 2018 instead of a year later. They are also said to have discussed setting higher-than-planned tax rates -- as high as 15 percent -- on U.S. companies’ stockpiled offshore profit.

But that may not be enough to cover the gap.

Thune and Republican Senator Rob Portman of Ohio said they’re not discussing moving the date to end individual rate cuts any earlier. Doing so would be politically difficult -- if a future Congress extends the individual cuts, as GOP leaders have promised they would, deficits would almost certainly increase even more. But if they’re not extended, individuals would receive only short-term tax relief while corporations see a permanent rate cut of 14 percentage points.

In addition to Rubio and Corker, the votes of a handful of other GOP senators remain in question.

Mike Lee of Utah is “undecided,” and -- like Rubio -- he’s working to make the child tax credit more generous, according to Conn Carroll, his spokesman.

Jeff Flake of Arizona, who has voiced concerns about tax cuts adding to the deficit, said Thursday he’s undecided as well.

Susan Collins of Maine has voiced opposition to cutting the tax rate for incomes above $1 million and has pushed for passage of two health-care stabilization bills that the House has been cold to. She hasn’t committed to supporting the final tax measure. “I am going to review the tax bill over the weekend,” she said. “There’s lots of rumors about what’s in it, what isn’t.”

There’s also uncertainty around the votes of GOP senators John McCain of Arizona and Thad Cochran of Mississippi. Both have been absent from the Senate this week with health issues, but officials have said both will be able to return for votes next week.

House Speaker Paul Ryan said Thursday he’s not sure which chamber will vote first on the final bill. One consideration, he said, was “managing absences in the Senate,” although he didn’t elaborate. -- Sahil Kapur

What to Watch on Friday

  • Members of the conference committee, a specially-appointed panel made up of House and Senate lawmakers, will have two hours to decide whether to sign the committee’s report. That process, from 10 a.m. to noon, shouldn’t cause much suspense. Republicans have enough numbers to get the report approved.
  • The report itself will describe the language that will appear in the final legislation. While it’s not entirely clear when, available signals suggest that report will be released Friday afternoon or evening.
  • Sometime later, perhaps Friday night, Congress will release the actual bill text.

Here’s What Happened on Thursday

  • Vice President Mike Pence postponed a trip to the Middle East, his office said, so he can be in Washington next week to preside over the Senate vote. Pence’s vote may be needed to break a possible 50-50 tie.

To contact Bloomberg News staff for this story: Sahil Kapur in Washington at skapur39@bloomberg.net.

©2017 Bloomberg L.P.

With assistance from Sahil Kapur